US P10 Case Studies

7 Episodes

Part 10

Over the next few weeks, we will together work through the entire set of analyses to figure out if Latin American Bank should enter the very profitable US retail banking sector. You can follow the study map and review all the videos. At the end of the this strategy training program you should be able to walk into any strategy assignment and complete the study accurately and with confidence.

THE CLIENT

We have a sleeping giant of a bank, a behemoth, which has developed specialized skills in managing risk when funding small entrepreneurs in Latin America. The bank has funded many Hispanics who take the money across the border into the US and start small businesses. They also have a large base of clients in Mexico and other Latin countries.

The bank believes there is a large, profitable and untapped market to provide micro, small and medium-sized loans to entrepreneurs who are pursuing unsexy businesses in the US.

The bank believes they can make this move work, and have largely begun the implementation planning with their own internal strategy teams. The internal strategy unit at the client, staffed by former colleagues from McKinsey and BCG, are leading this effort.

We have been brought in by the CEO to see if the US market is indeed attractive to the banking client. Much of the work involves detailed analysis of US banking segments, break-even points, loan size profitability analyses and channel analysis.

This training program teaches both the strategy analysis and quantitative logic to help the client make a decision.

It will be interesting, and challenging to determine if this banking client can build a business off rising US income-inequality. You will work with us as we attempt to answer this question.

The problem with serving entrepreneurs at the bottom of the economic pyramid is that current ideas typically offer no path to the middle class. So entrepreneurs earn some income and are slightly better off, but what happens next? Being better off was never intended to be the American Dream.

Yet, the opportunity could be significant for Latin American Bank if we consider that close to 50 million Americans earn a yearly salary that is less than the minimum wage threshold. Very few entrepreneurs from this group would qualify for banking loans or any other financing to pursue an entrepreneurial path.

The bank believes offering a full service-banking product and finely tailored services via an accessible retail structure can change this.

Can it?

The solution to this study is counter-intuitive, as you will soon find out.